Addressing COA Disallowances

Addressing COA
Disallowances
ATTY. ROY L. URSAL, CPA
DIRECTOR, COA REGIONAL OFFICE NO. XI
DAVAO CITY
PAGBA. 4th Quarterly Seminar and Meeting
22 November 2018, Grand Menseng Hotel, Davao City
I. COA’s Constitutional Mandate on Audit
Disallowances
II. Definition of Disallowance per RRPC
III. Provisions in RRPC treating on Audit Disallowances
IV.Remedies on Audit Disallowances
V. Decided Cases on Audit Disallowances

I. COA’s Constitutional Mandate on Audit
Disallowances
The Commission on Audit shall have the power, authority, and duty to
examine, audit, and settle all accounts pertaining to the revenue and
receipts of, and expenditures or uses of funds and property, owned or
held in trust by, or pertaining to, the Government, or any of its
subdivisions, agencies, or instrumentalities, including government-
owned or controlled corporations with original charters, and on a post-
audit basis: (a) constitutional bodies, commissions and offices that
have been granted fiscal autonomy under this Constitution; (b)
autonomous state colleges and universities; (c) other government-
owned or controlled corporations and their subsidiaries; and
(d) such non-governmental entities receiving subsidy or equity,
directly or indirectly, from or through the Government, which are
required by law or the granting institution to submit to such audit as a
condition of subsidy or equity. However, where the internal control
system of the audited agencies is inadequate, the Commission may
adopt such measures, including temporary or special pre-audit, as are
necessary and appropriate to correct the deficiencies. It shall keep the
general accounts of the Government and, for such period as may be
provided by law, preserve the vouchers and other supporting papers
pertaining thereto. (Section 2(1), Article IX-D, 1987 Constitution)

The Commission shall have exclusive authority, subject to the
limitations in this Article, to define the scope of its audit and
examination, establish the techniques and methods required therefor,
and promulgate accounting and auditing rules and regulations,
including those for the prevention and disallowance of irregular,
unnecessary, excessive, extravagant, or unconscionable expenditures,
or uses of government funds and properties. (Section 2(2), Article IX-
D, 1987 Constitution)
No law shall be passed exempting any entity of the Government or its

subsidiary in any guise whatever, or any investment of public funds,
from the jurisdiction of the Commission on Audit. (Section 3, Article
IX-D, 1987 Constitution) PAGBA. 4th Quarterly Seminar and Meeting
II. Definition of Disallowance, Charge,
Suspension, and AOM
Disallowance - the disapproval in audit of a transaction,
either in whole or in part. The term applies to the audit of
disbursements as distinguished from “charge” which applies
to the audit of revenues/ receipts. (Section 4.16, Rules and
Regulations on Settlement of Accounts)
Charge - inclusion or addition to an accountability pertaining

to the assessment, appraisal or collection of revenues,
receipts and other incomes such as those arising from under-
appraisal, underassessment or under-collection. (Section
4.11, Rules and Regulations on Settlement of Accounts)
Suspension – a temporary disallowance; refers to transactions
or accounts which appear illegal/improper/ irregular unless
satisfactorily explained or justified by the responsible officers or
until the requirements on matters raised in the course of audit
are submitted or complied with. (Section 4.27, Rules and
Audit Observation Memorandum (AOM) – a written

notification to the agency head and concerned officer/s
informing of deficiencies noted in the audit of accounts,
operations or transactions and requiring comments thereto
and/or submission of documentary and other information
requirements within a reasonable period. (Section 4.9, Rules and
PAGBA. 4 Quarterly Seminar and Meeting
th

Provisions in RRPC treating on Audit
Disallowances
NOTICE OF DISALLOWANCE
Disallowance –disapproval in audit of a transaction, either in
whole or in part; applies to the audit of disbursements.
Issuance of ND.
o Irregular, Unnecessary, Excessive, Extravagant, and Illegal
o Addressed to the agency head and the accountant

o Served on the persons liable
o Contents –
 transaction
 amount disallowed,
 laws/rules/regulations violated, and
 the persons liable
o Signed by the Audit Team Leader and the
Supervising Auditor
o Shall be settled within six months from
date of receipt of the ND.
NOTICE OF DISALLOWANCE
NOTICE OF CHARGE
Charge – generally used in connection with the audit of

revenues/receipts. It arises from under-appraisal, under-
assessment, or undercollection
Proper audit charge is the difference between

• The amount assessed/appraised and what is due the
government.
• Amount billed and the amount due the government
• Amount collected and what is due the government
Addressed to the agency head and the accountant
Served on the persons liable
Contents -
• the transaction and amount charged,
• reasons for the charge,
• laws/rules/regulations violated; and
• persons liable.
Signed by both the Audit Team Leader and the Supervising
Auditor.
Shall be settled within 6 months from date of receipt of NC.

NOTICE OF CHARGE
DETERMINATION OF PERSONS LIABLE
CRITERIA -
Nature of disallowance
Duties and responsibilities or obligation of
officers/employees concerned
Extent of participation
Amount of damage or loss to the government.

SERVICE OF COPY OF NOTICE OF DISALLOWANCE /
CHARGE
A copy of the ND/NC shall be served to each of the persons liable, by
the Auditor, through
 Personal Service
 Registered Mail - if personal service is not practicable
 Ordinary Mail - may be done if no registry service is
available in the locality of either the sender or the
addressee (Section 12.3, RRSA)
 Private Courier

Section 7, Rule IV, 2009 Revised Rules of Procedure of COA 22 November 2018, Grand Menseng Hotel, Davao City
Section 12.1, Rules and Regulations on Settlement of Accounts (RRSA)
Constructive service of ND/NC
In case there are several payees, as in the case of
a disallowed payroll, service to the accountant
who shall be responsible for informing all payees
concerned, shall constitute constructive service
to all payees listed in the payroll.
Section 7, Rule IV, 2009 Revised Rules of Procedure of COA

Section 12.1, Rules and Regulations on Settlement of Accounts (RRSA)
PERSONAL SERVICE
Personal delivery to the party
Leaving it in his office with his clerk or with a person having
charge thereof
Leaving the copy between the hours of eight in the morning and
six in the evening at the party’s residence, if known, with a
person of sufficient age and discretion then residing therein
if no person is found in his office, or his office is not known, or
he has no office

Section 12.2, Rules and Regulations on Settlement of Accounts
REGISTERED MAIL
If personal service is not practicable

Sending a copy to the
 office address of the party, if known;
otherwise
 at his residence with instruction to the
Postmaster to return the mail to the
sender after ten (10) days, if undelivered
Section 12.3, Rules and Regulations on Settlement of Accounts
Payment of filing fee
Cases requiring payment of filing fee - petition/appeal filed
before an adjudicating body of the Commission
o Appeal from audit disallowance.charge
o Appeal from disapproval of request for relief from
accountability
o Money claim, except if the claimant is a government agency
o Request for condonation of settled claim or liability except if
between government agencies

COA Resolution 2013-016, with clarification in COA Resolution No. 2018-017
NATURE AMOUNT
Appeals from notices of 1/10 of 1% of the amount involved,
disallowance or charge, requests provided the total filing fee shall not
for relief from accountability, exceed P20,000
condonation, and write-off
Money claims and approval of
sale 1/10 of 1% of the amount involved,
provided the total filing fee shall not
exceed P50,000 subject to certain
exceptions as may be approved by the
Commission Proper
Where to pay
 COA Central Office Cashier
 COA Regional Finance Office
 Postal Money Order
Payment of filing fee is jurisdictional.
 Any appeal without the required payment of filing fee will
be returned to the party concerned, for compliance with
such requirement.

EFFECT OF NON-PAYMENT
PAYMENT OF FILING FEE
 appeal/petition will be returned to the party concerned
for compliance with such requirement (Section 5, Rule IX,
RRPC);
 appeal is not perfected
 does not suspend the running of the period to appeal.
 appeal will be dismissed
 renders judgment final and executory

MOTION FOR EXTENSION OF TIME
 Non-extendible period of 15 days

 Commission Secretary is authorized to evaluate
requests/motions for extension of time to file
pleadings.
 Similar authority is given to the Cluster/Regional
Director for requests/motions filed before them.

MOTION FOR EXTENSION OF TIME
 Proper motion duly filed and served
 Full payment of docket fees
 Filed within the reglementary period to appeal
 Most compelling or justifiable reasons

DECISION NO. 2015-419
December 28, 2015
It is a basic rule of remedial law that a motion for extension of time to

file a pleading must be filed before the expiration of the period
sought to be extended. Since the motion for extension was filed after
the lapse of the prescribed period, there was no more period to extend.
citing Philippine National Bank vs. Deang
Marketing Corporation, G.R. No. 177931, December 8, 2008)
COA DECISION 2015-455

“parties and counsel should not assume that courts are bound to grant
the time they prayed for. After all, a motion that is not acted upon in
due time is deemed denied.”
III. Remedies on Audit Disallowances
APPEAL BEFORE
THE DIRECTOR

Who May Appeal
An aggrieved party may appeal from the
decision of the Auditor to the Director who
has jurisdiction over the agency under audit,
except for ND/NC of the audit team under
the FAO, SAO or ICFAU, which shall be
appealed directly to the Commission Proper

Rule V, Section 1, 2009 Revised Rules of Procedure of the Commission on Audit (RRPC)
How appeal is taken
The appeal to the Director shall be taken by
o filing an Appeal Memorandum with the Director, copy
furnished the Auditor.
o proof of service of a copy to the Auditor shall be attached to
the Appeal Memorandum.
o proof of payment of the filing fee prescribed under the Rules
shall likewise be attached to the Appeal Memorandum.

22 November on
Rule V, Section 2, 2009 Revised Rules of Procedure of the Commission 2018, Grand
Audit Menseng Hotel, Davao City
(RRPC)
When appeal is taken
An Appeal must be filed within six

(6) months after receipt of the
decision appealed from.

Rule V, Section 4 , 2009 Revised Rules of Procedure of the Commission on Audit (RRPC)
Interruption of Time to Appeal
The receipt by the Director of the Appeal
Memorandum shall stop the running of the
period to appeal which shall resume to run
upon receipt by the appellant of the
Director’s decision.

Rule V, Section 5 , 2009 Revised Rules of Procedure of the Commission on Audit (RRPC)
Power of Director on Appeal
The Director may affirm, reverse, modify or alter the
decision of the Auditor.
If the Director reverses, modifies or alters the decision of
the Auditor
o the case shall be elevated directly to the Commission
Proper for automatic review of the Directors’ decision.
o The dispositive portion of the Director’s decision shall
categorically state that the decision is not final and is
subject to automatic review by the CP.
22 November
Rule V, Section 7 , 2009 Revised Rules of Procedure of the Commission on Audit2018, Grand Menseng Hotel, Davao City
(RRPC)
Automatic Review
Director’s decision subject of automatic review by
the Commission Proper- one which
o lifts/reduces a liability under a Notice of Disallowance
(ND)/Notice of Charge (NC)/Auditor’s decision by an
amount in excess of P100,000.00
o excludes a person liable under the ND/NC/Auditor’s
decision
Not to be promulgated or released to appellant

Where the Director’s decision pertains to several
NDs/NCs/Auditor’s decisions, some of which are
subject to automatic review and some are not,
separate decisions shall be prepared, and only
the decision on the disallowances/charges that
are for automatic review shall be elevated to the
Commission Proper. The decision which is not for
automatic review shall already be promulgated
by the Director;

COA Resolution 2016-023 dated December 22, 2016
APPEAL BEFORE THE
COMMISSION PROPER
(PETITION FOR REVIEW)

Who may appeal and where to appeal
The party aggrieved by a

decision of the Director may
appeal to the Commission
Proper.

Rule VII, Section 1 , 2009 Revised Rules of Procedure of the Commission on Audit (RRPC)
Finality of Decisions or Resolutions
A decision or resolution of the

Commission upon any matter within its
jurisdiction shall become final and
executory after the lapse of thirty (30)
days from notice of the decision or
resolution.

Section 9, (as amended), Rule X, 2009 Revised Rules of Procedures of the Commission on Audit (RRPC)
Petition for Certiorari – Judicial Review
Any decision, order or resolution of the Commission
may be brought to the Supreme Court on certiorari by
the aggrieved party within thirty (30) days from
receipt of a copy thereof in the manner provided by
law and the Rules of Court.
When the decision, order or resolution adversely
affects the interest of any government agency, the
appeal may be taken by the proper head of that
agency.
Section 1, Rule XII, Rules and Regulations on Settlement of Accounts
Effect of Filing a Petition for Certiorari
The filing of a petition for certiorari shall
not stay the execution of the judgment or
final order sought to be reviewed, unless
the Supreme Court shall direct otherwise
upon such terms as it may deem just.

Section 9, (as amended), Rule X, 2009 Revised Rules of Procedures of the Commission on Audit (RRPC)
MOTION FOR
RECONSIDERATION

FILING OF MR AND GROUNDS
May be filed within thirty (30) days from notice of the
decision or resolution
Grounds for the motion
◦evidence is insufficient to justify the decision;
◦the decision is contrary to law.
◦raises new matters
Only one (1) motion for reconsideration shall be
entertained.

22 November
Section 10, (as amended), Rule X, 2009 Revised Rules of Procedures 2018, Grand Menseng
of the Commission on Audit Hotel, Davao City
(RRPC)
Form and Contents
 Verified
 Shall point outspecifically the findings or conclusions of

the decision which are not supported by the evidence or
which is contrary to law
 Expressreference to the evidence (testimonial or
documentary) or the provisions of law that allegedly do
not support the findings or conclusions

Section 11, Rule X, 2009 Revised Rules of Procedures of the Commission on Audit (RRPC)
Effect/Disposal of the MR
o Suspends the running of the period to elevate the matter to the
Supreme Court
o Within 2 days from its filing, the Commission Secretary refers the
motion to the Director for Comments
o Commission Secretary upon receipt of the Director’s comments, shall
forward it so the Legal Services Sector (now the Commission Proper
Adjudication Secretariat and Support Services Sector), for study and
recommendation.
o CPASSSS drafts decision for the consideration of the Commission
Proper

Effect/Disposal of the MR
o Decision, if the recommendation is to consider and modify
the decision
o Resolution – upon meritorious grounds
o Minute Resolution – if the recommendation is to deny the
motion for:
 Filed out of time
 Failure to raise a new matter
 Failure to show sufficient ground to justify a
reconsideration of the assailed decision or resolution
Appeal Before the
Appeal Before the Director Commission Proper
Appealed Decision Auditor’s Decision Director’s Decision
Mode of Appeal Appeal Memorandum Petition for Review, with
certified true copy of the
decision appealed from,
certified true copies of
references, and other
supporting papers
Where to file Office of the Director, Commission Secretary,

which has jurisdiction over with proof of Service to
the agency, with proof of the Director
Service to the Auditor
Jurisdictional requirement Payment of filing fee, plus Payment of filing fee, plus
legal research fund legal research
PAGBA. fund
4th Quarterly Seminar and Meeting
APPEALS
Appeal Before the
Appeal Before the Director Commission Proper
Time to appeal Within 6 months from date Within the time remaining
of receipt of Auditor’s of the 6 months from recept
decision of Director’s decision
Parties Appellant vs. Appellee Petitioner vs. Respondent
Contents: Concise statement of facts Concise statement of facts
and issues and issues
Grounds Grounds
Material dates Material dates
Order to Answer and Issued to the Auditor by the Issued to the Director by
Transmittal of Records Director, within 5 days after the Commission Secretary,
receipt of the Appeal within 5 days from receipt
Memorandum, together of the Petition, together
with the entire records of with the entire records of
the case, including EDSE the case.
APPEALS
Appeal Before the Appeal Before the
Director Commission Proper
Filing of Answer and Within 15 days from To the Commission
Transmittal of Records receipt of the Order Secretary, within 15 days
from receipt of the Order,
copy furnished the
Petitioner
Filing of Reply and Not required Petitioner may file with
additional pleadings or the Commission Secretary,
documents copy furnished the
Director, within 15 days
from receipt of Answer
Additional pleadings or
documents, if necessary
in the proper adjudication
of the case
APPEALS
Appeal Before the Appeal Before the
Director Commission Proper
Filing of Reply and Petitioner may file with

additional pleadings or the Commission Secretary,
documents copy furnished the
Director, within 15 days
from receipt of Answer
Additional pleadings or
documents, if necessary
in the proper adjudication
of the case
Period to Decide Within 5 days after Within 60 days from the
submission of complete day it submitted for
documents decision
Motion for Not allowed Only one motion.
Reconsideration
APPEALS
Entry of Decision
Final and executory decision - If no appeal is filed
within the time provided in these rules
Entered by the Commission Secretary in the Docket
which shall contain the dispositive part of the
decision
Signed by the Commission Secretary with a
certificate that such decision has become final and
executory.
Recording of the decision shall constitute the entry.
Receipt of
Receipt of the Receipt of the Receipt
Receipt Appeal Director’s Petition for of CP
of ND Memorandum Decision Review Decision MR
(MET) (MET)
(A) Suspension of the (B)

running of the
period
180 days
30
PAGBA. Quarterly Seminar and Meeting
4th
MET – Motion for Extension of Time days Hotel, Davao City
22 November 2018, Grand Menseng
COA Officials Authorized to Issue NFD
Audit Team Leader and - For ND/NC issued by them

Supervising Auditor
Director having supervision - For ND/NC issued by the team

over the special audit team
Cluster/Regional Director - For Decision rendered by him
Commission Secretary - For a Decision of the Commission

Proper
Section 22.3 of the Rules and Regulations on Settlement of Accounts
Service of Notice of Finality of Decision
 A copy of the NFD shall be served by the Auditor of the agency
concerned on the persons liable or their authorized
representatives who shall indicate their printed name and
signature and the date of receipt thereof. (Section 22.5, RRSA)
 NFDs issued by the Commission Secretary on COA Decisions

involving disallowances and charges are endorsed to the Auditor
(ATL) with request for assistance in serving the NFD and the
return of the copy of the NFD duly received by the persons
liable
Section 22.5 of the Rules and Regulations on Settlement of Accounts
COA ORDER OF EXECUTION (COE)
Definition – a written instruction to withhold payment
of salary and other money due to persons liable, for
settlement of their liability
Purpose - To enforce settlement of an audit
disallowance/charge
Time to issue – not earlier than five (5) days from
receipt of the NFD by the agency head

Form and Content
 Addressed to the agency head, Attention:

the Treasurer/Cashier
 Indicate the NFD
 Particulars of the decision being enforced
 The persons liable

Monitoring the implementation of the COE
 Report of the Auditor to the Director on the action taken

by the agency on the COE
 Unsettled COEs shall be referred to the General Counsel for
appropriate action, including referral to the Office of the
Solicitor General and the Ombudsman

IV. Decided Cases on Audit Disallowances
Silang vs COA (GR N0. 213189, Sept 8, 2015)
The City Mayor, the local sanggunian and the Officers and employees of the
union who actively participated in the negotiations for the approval of the
disallowed incentives are solidarily liable to refund the total disallowance
PCSO vs COA (GR 216776, Apr 19, 2016)
Only the BOD who approved the Resolution granting the disallowed benefits,
and the approving officers shall refund the total amount of the disallowance.

Good faith is a state of mind denoting "honesty of
intention, and freedom from knowledge of
circumstances which ought to put the holder upon
inquiry; an honest intention to abstain from taking any
unconscientious advantage of another, even through
technicalities of law, together with absence of all
information, notice, or benefit or belief of facts which
render transaction unconscientious."

DBP vs. COA (GR 221076. March 13, 2018
Good faith of responsible officers - Requisites

 they believed that they could disburse the disallowed
amounts based on the provisions of the law; and
 they lacked knowledge of facts or circumstances which
would render the disbursements illegal when:
o there is no similar ruling by this Court prohibiting a
particular disbursement or
o there is no clear and unequivocal law or administrative
order barring the same.
MWSS vs. COA. (G.R. Nos. 195105 & 220729, November
21, 2017).
MWSS Board members did not act in good faith and may be
held liable for refund because they approved the said benefits
even though these patently contravened R.A. No. 6758, which
clearly and unequivocally stated that governing boards of the
GOCC’s can no longer fix compensation and allowances of
their officials or employees.


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PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

No law shall be passed exempting any entity of the Government or its

Charge - inclusion or addition to an accountability pertaining

Audit Observation Memorandum (AOM) – a written

22 November 2018, Grand Menseng Hotel, Davao City

PAGBA. 4th Quarterly Seminar and Meeting

Charge – generally used in connection with the audit of

Proper audit charge is the difference between

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

Section 7, Rule IV, 2009 Revised Rules of Procedure of COA

PAGBA. 4th Quarterly Seminar and Meeting

If personal service is not practicable

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

 Non-extendible period of 15 days

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

It is a basic rule of remedial law that a motion for extension of time to

COA DECISION 2015-455

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

An Appeal must be filed within six

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

The party aggrieved by a

PAGBA. 4th Quarterly Seminar and Meeting

A decision or resolution of the

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

 Shall point outspecifically the findings or conclusions of

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

Where to file Office of the Director, Commission Secretary,

Filing of Reply and Petitioner may file with

(A) Suspension of the (B)

Audit Team Leader and - For ND/NC issued by them

Director having supervision - For ND/NC issued by the team

Cluster/Regional Director - For Decision rendered by him

Commission Secretary - For a Decision of the Commission

 NFDs issued by the Commission Secretary on COA Decisions

PAGBA. 4th Quarterly Seminar and Meeting

 Addressed to the agency head, Attention:

PAGBA. 4th Quarterly Seminar and Meeting

 Report of the Auditor to the Director on the action taken

PAGBA. 4th Quarterly Seminar and Meeting

PCSO vs COA (GR 216776, Apr 19, 2016)

PAGBA. 4th Quarterly Seminar and Meeting

PAGBA. 4th Quarterly Seminar and Meeting

Good faith of responsible officers - Requisites

PAGBA. 4th Quarterly Seminar and Meeting

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